Wind Industry Secures Tax Credit, But Damage May Be Done

Wind turbines dwarf a church near Wilson, Kan. Although Congress voted to extend a wind energy tax credit, the temporary uncertainty dealt a blow to the industry.

Charlie Riedel
/ AP

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Originally published on January 3, 2013 5:10 pm

The wind energy industry is dependent on something even more unpredictable than wind: Congress. Hidden in the turmoil over the "fiscal cliff" compromise was a tax credit for wind energy.

Uncertainty over the credit had lingered long before the last-minute political push, causing the industry to put off further long-term planning. So while the now-approved tax credit revives prospects for an industry facing tens of thousands of layoffs, don't expect to see many new turbines coming up soon.

Growing Uncertainty

Mark Goodwin, head of developer Apex Wind Energy, says his company was "on pins and needles" over the "fiscal cliff" negotiations. It was worried about extension of the tax credit, which keeps wind energy prices competitive with electricity produced from fossil fuels.

"Without the [tax credit], the cost of the wind energy for a specific project is going to be about a third higher," Goodwin says.

Congress renewed the tax credit for a year, but the industry had no idea which way it would go, so it had to prepare for the worst. Nobody wanted to gamble on starting a project that wouldn't be competitive. So after rushing to complete as many projects as possible before the tax credit expired, developers stopped planning for the future. Some companies had to lay off workers. Some manufacturers went bankrupt.

Apex stopped hiring and tried to hold on to the workers it had.

"Apex has 60 people, so we really had to push the 'I believe' button to keep them on payroll that the policy would come back," Goodwin says.

So while there is a tax credit now, there won't be many new wind farms coming up in 2013. That's the downside.

'Temporary Damage'

"It's still temporary damage," says Scott Clavenna, CEO of Greentech Media, a media and research firm focused on renewable energy.

Clavenna says a small change in the tax credit means firms don't have to finish wind farms in 2013 to get the credit; they just have to start them. So he says 2014 and 2015 are looking up.

Firms can start planning again. Since wind farms take about a year and a half to build, new ones might start coming back online in 2014. But alongside all of this up and down is a debate in Congress over whether the wind industry deserves to have a tax credit that has propped it up for two decades.

The industry, Clavenna says, sees that writing on the wall.

"Even the wind industry says we need these subsidies, but it's OK to phase them out over six to 10 years," he says. "It is subsidy-dependent though it's getting really close to not being."

Technological advances have brought the price of wind down 25 percent since 2008, and Clavenna says if that continues, the industry will be able to free itself from the boom-and-bust cycle of tax-credit dependence.

In the short term, though, the credit expires again at the end of 2013. So new wind farms started in 2013 will be safe, but this time next year, new construction may be on hold again.

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Transcript

AUDIE CORNISH, HOST:

While most working Americans will feel the payroll tax pinch, the fiscal cliff deal also included an important tax credit. It's for the U.S. wind energy industry which is facing tens of thousands of layoffs.

NPR's Sabri Ben-Achour has that story.

SABRI BEN-ACHOUR, BYLINE: The trouble with wind, as any sailor can attest, is that it can stop blowing. But people in the wind industry say they're dependent on something even more unpredictable than wind: Congress.

MARK GOODWIN: So we were definitely on pins and needles.

BEN-ACHOUR: That's Mark Goodwin, CEO of APEX, a wind developer based in Charlottesville, Virginia. He's talking about the fiscal cliff negotiations, specifically whether something called the Wind Energy Production Tax Credit would get extended. It's a subsidy for wind power that keeps it competitive with electricity produced from fossil fuels.

GOODWIN: Without the PTC, the cost of wind energy, you know, for, you know, a specific project is going to be about a third higher.

BEN-ACHOUR: Congress ended up at the last minute renewing the tax credit for a year, but the industry had no idea which way it would go, so they had to prepare for the worst. Nobody wanted to gamble on starting a project that wouldn't be competitive. So after rushing to complete as many projects as possible, before the tax credit expire, developers including APEX just stopped - stopped planning for the future.

Some companies had to lay off workers. Some manufacturers went bankrupt. APEX stopped hiring and tried to hold on to the workers it had.

GOODWIN: APEX had 60 people so we really had to push the I believe button to keep them on payroll that the policy would come back.

BEN-ACHOUR: So what this means is yes, there's a tax credit but there won't be many new wind farms coming online in 2013. That's the downside.

SCOTT CLAVENNA: It's still temporary damage.

BEN-ACHOUR: Scott Clavenna is CEO of Greentech Media, a renewable energy media and research firm. He says lawmakers changed the language in this year's tax credit, so that the wind industry could quickly recover from the crash. What's different now is that firms don't have to finish wind farms in 2013 to get the credit, they just have to start them. So as a result...

CLAVENNA: By 2014 and '15, I think look a lot better now.

BEN-ACHOUR: Firms can start planning again and it takes about a year and a half to build a wind farm. So a lot of wind farms might come online in 2014. But alongside all of this up and down, is a debate in Congress over whether the wind industry deserves to have a tax credit that's propped it up for two decades. And the industry, says energy analyst Clavenna, sees that writing on the wall.

CLAVENNA: Even the wind industry is saying we need these subsidies but it's OK to phase them out over six to 10 years. It is subsidy dependent, though it's getting very close to not being.

BEN-ACHOUR: Advances in technology have brought the price of wind down 25 percent since 2008. And firms say that if that continues the industry will be able to free itself from the boom and bust cycle of tax credit dependence. In the short-term, though, the credit still expires again at the end of 2013. So new wind farms started in 2013 are safe. But this time next year, new construction may be on hold all over again.